Refer to the income statements for Kellogg’s and General Mills reproduced at the end of the book....

Question

Refer to the income statements for Kellogg’s and General Mills reproduced at the end of the book.

Required
1. Which is the largest expense for each company in the most recent year? What is its dollar amount? Is it logical that this would be the largest expense given the nature of each company’s business? Explain your answer.
2. One of the accounts on each company’s income statement is ?oSelling, general and administrative expense.?? For each of the two most recent years, compute the ratio of this expense to net sales for each company. Did this ratio increase or decrease from one year to the next? Which company has the lower ratio in each of the two years?
3. Compute the ratio of income taxes to income (earnings) before taxes (use ?oEarnings before Income Taxes and After-tax Earnings from Joint Ventures?? for General Mills) for the two most recent years for each company. Is the ratio the same for Kellogg’s for both years? Is the ratio the same for General Mills for both years? Which company has the higher ratio for each of the two years?

Robert · Accepted Answer

Refer to the income statements for Kellogg’s and General Mills reproduced at the end of the 
book.
Required 
1. Which is the largest expense for each company in the most recent year? What is its dollar 
amount? Is it logical that this would be the largest expense given the nature of each 
company’s business? Explain your answer. 
In Kellogg Company, the largest expense is cost of goods sold, amounting to $7,108. 
In General Mills income statement, the largest expense is cost of sales, amounting to 
$8,922.9.  
Since the business of the company is to manufacture / purchase the goods and sale it 
with some margin, the cost of sales is always the largest expense in the company’s 
business.
2.

Refer to the income statements for Kellogg’s and General Mills reproduced at the end of the book. Required 1. Which is the largest expense for each company in the most recent year? What is its dollar...

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